The New Orleans area is succeeding in attracting new residents to its historic neighborhoods and in attracting companies to buildings in the Central Business District and beyond, thereby solidifying the post-Katrina turnaround and stabilization of the area’s real estate market, speakers at the UNO Economic Outlook and Real Estate Forecast Seminar said Friday.
“This is a fabulous time for real estate: commercial, residential, mortgage, title insurance and all the businesses we’re in,” said Richard Haase, president of Latter & Blum Inc. “The benefits that we’re experiencing have come through thoughtful engagement of civic and community leaders.”
The metro area has continued its shift from a buyer’s market to a balanced one, Haase said.
In a buyer’s market, it would take six months or longer to sell all the properties available for sale at any one time. In a seller’s market, the supply could be sold in three months or less. A balanced market is somewhere in between. The metro area currently has enough inventory to last about 4.2 months, Haase said.
In a few areas like the Garden District and the French Quarter, where supply is low, sellers remain in the driver’s seat. The average price for a condominium in the French Quarter, for instance, rose from $387 per square foot in early May 2013 to nearly $450 per square foot in the first week of this month, said Geoff Lutz, whose company, G. Geoffrey Lutz Appraisal Services, surveys the area.
Still, Haase said, “It’s not a seller’s market. It’s not a buyer’s market. It’s a healthy market.”
Foreclosures, short sales and preforeclosures dropped in Louisiana and the New Orleans area by 31 percent last year, he said. The state ranks in the lowest quartile of all states for defaulting loans.
The housing market will be influenced this year by consumer confidence, mortgage rates and the burn-off of excess inventory, Haase said.
“The jobs numbers are stronger this year than last year, so that’s providing a lot more confidence and wind into the marketplace,” he said.
In the office market, said Bruce Sossaman, leasing director at Corporate Realty, the occupancy rate in the CBD’s top-tier or Class A office space rose to 89 percent in 2013, up from 87 percent in 2012. He attributed the boost to the growing attractiveness of the downtown area as a place to live and play.
Retail development in the CBD “has been tremendously important to the office market, mainly because it’s taking product off the market,” Sossaman said, but also because “the more development you have downtown, the more people want to be downtown.”
There are more than 3,500 residential units in the Downtown Development District today and another 2,000 are in the development pipeline, said Leigh Ferguson, director of economic development for the DDD.
Still, Sossaman described the Class A office-space market as only “stable” because new tenant growth has been sluggish.
“So it’s a mixed bag, but we think it’s going to continue to stabilize and occupancy will continue to increase,” he said.
The addition of retail amenities to accommodate the growing downtown residential community will contribute to that growth, he said.
The smaller Metairie market is a “much different animal,” Sossaman said. Occupancy is higher there. Class A office buildings had an occupancy rate of 95 percent. Class B office space was 92 percent occupied.
One of the challenges to growth in the Metairie market is a lack of available sites for development. That will likely result in improvements in the office-market occupancy rate in nearby areas such as West Metairie, Kenner and Elmwood, Sossaman said.
There was no gloom in the retail report presented by Marty Mayer, president and chief executive officer of Stirling Properties.
“I can sum it up in three words: Retail is hot,” he said.
Retail sales exceeded pre-Katrina levels in 2013, and this year’s sales are 6 percent ahead of 2013, Mayer said.
Much of the sizzle is concentrated in Orleans Parish, where the population is younger and more educated and has more discretionary income, he said.
“Retailers are really anxious to get into New Orleans, sometimes for the first time, sometimes to expand,” Mayer said. “There’s kind of been a frenzy.”
Last year brought the opening of the Mid-City Marketplace on Carrollton Avenue, a Whole Foods store on North Broad Street and an H&M store in the French Quarter. This year, the Outlet Collection at Riverwalk along the riverfront and Magnolia Marketplace on South Claiborne Avenue are due to open.
“All these big-box retailers were very anxious to come here to be in New Orleans,” Mayer said of the latter development, whose tenants include Michaels, PetSmart, Ross Dress for Less, Shoe Carnival, T.J. Maxx and Ulta beauty products. “If I had another 100,000 square feet, we could have easily leased it to some others that we had to turn away,” he said.